TOLEDO, Ohio--(BUSINESS WIRE)--Feb. 7, 2006--Health Care REIT, Inc. (NYSE:HCN) announced today operating results for its fourth quarter and year ended December 31, 2005.
"We enjoyed a record year with $642.5 million of gross investments," commented George L. Chapman, chief executive officer of Health Care REIT, Inc. "In addition, we generated strong FAD growth of 19% and realized improved facility payment coverages. We successfully executed our plan to enhance the overall portfolio and quality of earnings by disposing of approximately $147 million of non-core assets, reducing loans to 6% of gross real estate investments and virtually eliminating subdebt. Our dispositions resulted in the recognition of an additional $4.5 million of interest income. Based on our strengthened portfolio and FFO and FAD growth prospects, the Board of Directors approved a 3% increase in the common stock dividend to $0.64 per quarter commencing with the May 2006 dividend."
Key Performance Indicators.
Quarter Quarter Year Year
Ended Ended Percentage Ended Ended Percentage
12/31/05 12/31/04 Change 12/31/05 12/31/04 Change
----------------------------------------------------------------------
Net Income
Available to
Common
Stockholders
per Diluted
Share $0.47 $0.30 57% $1.15 $1.39 -17%
----------------------------------------------------------------------
FFO per
Diluted Share
- Adjusted(1) $0.83 $0.71 17% $3.03 $2.82 7%
----------------------------------------------------------------------
FAD per
Diluted Share
- Adjusted(1) $0.92 $0.68 35% $3.04 $2.56 19%
----------------------------------------------------------------------
Common
Dividends per
Share $0.62 $0.60 3% $2.46 $2.385 3%
----------------------------------------------------------------------
FFO Payout
Ratio -
Adjusted(1) 75% 85% 81% 85%
----------------------------------------------------------------------
FAD Payout
Ratio -
Adjusted(1) 67% 88% 81% 93%
----------------------------------------------------------------------
(1) Adjusted for losses on extinguishment of debt in 2Q05 and 4Q05
and impairment of assets in 3Q04.
4Q05 Earnings Discussion. The fourth quarter 2005 reported net income of $0.47 per diluted share includes $2.2 million, or $0.04 per diluted share, of losses on extinguishment of debt, net of $0.8 million of fees collected in connection with the extinguishments. Fourth quarter 2005 earnings were positively impacted by the recognition of $4.2 million, or $0.07 per diluted share, of additional interest income as a result of loans that were repaid during the quarter. These loans were either on non-accrual or partial accrual and all contractual interest was received from the borrowers. Fourth quarter 2005 adjusted FAD was higher than FFO due to the inclusion of $4.9 million, or $0.09 per diluted share, of cash receipts in excess of rental income, which includes non-recurring cash rental payments of $7.8 million, or $0.14 per diluted share. The following table reconciles the FFO and FAD adjustments:
4Q05 FFO and FAD Reconciliation.
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended
12/31/05 12/31/04 Percentage 12/31/05 12/31/04 Percentage
FFO FFO Change FAD FAD Change
----------------------------------------------------------------------
Per Diluted
Share $0.79 $0.71 11% $0.88 $0.68 29%
----------------------------------------------------------------------
Debt
extinguish-
ment
charges,
net $0.04 $0.04
----------------------------------------------------------------------
Per Diluted
Share -
Adjusted $0.83 $0.71 17% $0.92 $0.68 35%
----------------------------------------------------------------------
Included
items:
----------------------------------------------------------------------
Non-
recurring
cash
payments $0.14 $0.06
----------------------------------------------------------------------
Additional
interest
income $0.07 $0.07
----------------------------------------------------------------------
2005 Earnings Discussion. Reported fiscal 2005 net income of $1.15 per diluted share includes $20.7 million, or $0.38 per diluted share, of losses on extinguishment of debt, which is net of $0.8 million of fees collected in connection with the extinguishments. Additionally, 2005 earnings were positively impacted by the recognition of $4.5 million, or $0.08 per diluted share, of additional interest income as a result of loans that were repaid during the year. Fiscal 2005 adjusted FAD was higher than FFO due to the inclusion of $0.7 million, or $0.01 per diluted share, of cash receipts in excess of rental income, which includes non-recurring cash rental payments of $13.9 million, or $0.25 per diluted share. The following table reconciles the FFO and FAD adjustments:
2005 FFO and FAD Reconciliation.
Year Year Year Year
Ended Ended Ended Ended
12/31/05 12/31/04 Percentage 12/31/05 12/31/04 Percentage
FFO FFO Change FAD FAD Change
----------------------------------------------------------------------
Per Diluted
Share $2.65 $2.82 -6% $2.66 $2.55 4%
----------------------------------------------------------------------
Debt
extinguish-
ment
charges,
net $0.38 $0.38
----------------------------------------------------------------------
Impairment
charge $0.01 $0.01
----------------------------------------------------------------------
Per Diluted
Share -
Adjusted $3.03 $2.82 7% $3.04 $2.56 19%
----------------------------------------------------------------------
Included
items:
----------------------------------------------------------------------
Non-
recurring
cash
payments $0.25 $0.16
----------------------------------------------------------------------
Additional
interest
income $0.08 $0.08
----------------------------------------------------------------------
Dividends for Fourth Quarter 2005. As previously announced, the Board of Directors declared a dividend for the quarter ended December 31, 2005 of $0.62 per share as compared to $0.60 per share for the same period in 2004. The dividend represents the 139th consecutive dividend payment. The dividend will be payable February 21, 2006 to stockholders of record on January 31, 2006.
Dividends for 2006. The Board of Directors approved a new quarterly dividend rate of $0.64 per share per quarter ($2.56 per share annually), commencing with the May 2006 dividend, up 3% from $0.62 per share, the rate during 2005. The company's dividend policy is reviewed annually during the Board of Directors' January planning session. The declaration and payment of quarterly dividends remains subject to the review and approval of the Board of Directors.
Kindred / Commonwealth Update. The company previously announced its anticipated sale of four long-term acute care hospitals to Kindred Healthcare, Inc. for $80 million. The company now anticipates Kindred will lease these facilities under a master lease. The terms of the master lease are being negotiated. The transaction between Kindred and Commonwealth is anticipated to occur this quarter.
Outlook for 2006. The company is introducing its 2006 guidance and expects to report net income available to common stockholders for the full year in the range of $1.28 to $1.36 per diluted share, FFO in a range of $2.88 to $2.96 per diluted share and FAD in a range of $2.77 to $2.85 per diluted share. In preparing guidance, the company made the following assumptions:
- Gross investments of $450 to $550 million, including acquisitions of $300 million at an average initial yield of 8.25-8.75%.
- Gross investments include funded new development of $150 to $250 million with the investment balance capitalized at the company's average cost of debt (approximately 6.50-6.75%) and recorded as a reduction in interest expense until completion.
- Dispositions of $100 to $150 million at an average yield of 11.0%.
- Net investments of $300 to $450 million.
- General and administrative expenses of $21 to $22 million for the full year 2006. Included in the company's first quarter 2006 G&A estimate is approximately $1.7 million ($0.03 per diluted share) of non-cash expenses for required accelerated vesting of options and restricted stock grants pursuant to Statement of Financial Accounting Standards No. 123(R), which was adopted on January 1, 2006. This represents a $1.3 million ($0.02 per diluted share) increase compared to the amortization methodology used historically. Excluding this item, the anticipated annual increase in G&A of approximately $2.5 to $3.5 million is attributable to increases in professional services fees, compensation costs, including new hires, and marketing expenses as a result of our larger size and anticipated future growth.
- Straight-line rent of $7.0 million before any one-time cash payments.
- An anticipated reduction in leverage from year-end 2005 levels through issuance of equity from the company's DRIP and potential secondary equity offerings.
The guidance for 2006 FFO is below 2005 FFO primarily as a result of the $4.5 million of non-recurring 2005 interest income, a $3.8 to $4.8 million increase in G&A expenses, and an approximate $4.5 million reduction in rent and interest as a result of the Kindred/Commonwealth transaction, representing a decrease of $0.21 to $0.22 per diluted share.
The company's guidance excludes any impairments, unanticipated additions to the loan loss reserve or other additional one-time items. Please see Exhibit 15 for a reconciliation of the outlook for net income to FFO and FAD.
Supplemental Reporting Measures. The company believes that net income, as defined by U.S. generally accepted accounting principles (U.S. GAAP), is the most appropriate earnings measurement. However, the company considers funds from operations (FFO) and funds available for distribution (FAD) to be useful supplemental measures of its operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (NAREIT) created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means net income, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FAD represents FFO excluding the non-cash straight-line rental adjustments.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. Additionally, the company excludes the non-cash provision for loan losses. The company believes that EBITDA, along with net income and cash flow provided from operating activities, is an important supplemental measure because it provides additional information to assess and evaluate the performance of its operations. Additionally, restrictive covenants in the company's long-term debt arrangements contain financial ratios based on EBITDA. The company primarily utilizes EBITDA to measure its interest coverage ratio which represents EBITDA divided by interest expense.
In October 2003, NAREIT informed its member companies that the SEC had changed its position on certain aspects of the NAREIT FFO definition, including impairment charges. Previously, the SEC accepted NAREIT's view that impairment charges were effectively an early recognition of an expected loss on an impending sale of property and thus should be excluded from FFO similar to other gains and losses on sales. However, the SEC's clarified interpretation is that recurring impairments taken on real property may not be added back to net income in the calculation of FFO and FAD. Although the company has adopted this recommendation, it has also disclosed FFO and FAD adjusted for the impairment charge in 2004 for enhanced clarity.
In April 2002, the Financial Accounting Standards Board issued Statement No. 145 that requires gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under Statement No. 4. The company adopted the standard effective January 1, 2003 and has properly reflected the current quarter loss on extinguishment of debt which may not be added back to net income in the calculation of FFO. Although the company has adopted this treatment, it has also disclosed FFO, FAD and EBITDA adjusted for the loss on extinguishment of debt in 2005 for enhanced clarity.
FFO, FAD and EBITDA are financial measures that are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. The company's management uses these financial measures to facilitate internal and external comparisons to historical operating results, in making operating decisions and for budget planning purposes. Additionally, FFO and FAD are utilized by the Board of Directors to evaluate management. FFO, FAD and EBITDA do not represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, FFO, FAD and EBITDA, as defined by the company, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies. Please see Exhibits 13, 14 and 16 for reconciliations of FAD, FFO and EBITDA to net income.
Conference Call Information. The company has scheduled a conference call on February 8, 2006, at 9:00 a.m. Eastern time to discuss its fourth quarter and year end results, industry trends, portfolio performance and outlook for 2006. To participate in the webcast, log on to www.hcreit.com or www.earnings.com 15 minutes before the call to download the necessary software. Replays will be available for 90 days through the same Web sites. This earnings release is posted on the company's Web site under the heading Press Releases.
Health Care REIT, Inc., with headquarters in Toledo, Ohio, is a real estate investment trust that invests in health care and senior housing properties. At December 31, 2005, the company had investments in 442 facilities in 36 states with 54 operators and had total assets of approximately $3.0 billion. The portfolio included 195 assisted living facilities, 203 skilled nursing facilities, 31 independent living/continuing care retirement communities and 13 specialty care facilities. More information is available on the Internet at www.hcreit.com.
This document may contain "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements concern and are based upon, among other things, the possible expansion of the company's portfolio; the sale of properties; the performance of its operators and properties; its ability to enter into agreements with new viable tenants for properties that we take back from financially troubled tenants, if any; its ability to make distributions; its policies and plans regarding investments, financings and other matters; its tax status as a real estate investment trust; its ability to appropriately balance the use of debt and equity; its ability to access capital markets or other sources of funds; and its ability to meet its earnings guidance. When the company uses words such as "may," "will," "intend," "should," "believe," "expect," "anticipate," "estimate" or similar expressions, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The company's expected results may not be achieved, and actual results may differ materially from expectations. This may be a result of various factors, including, but not limited to: the status of the economy; the status of capital markets, including prevailing interest rates; issues facing the health care industry, including compliance with, and changes to, regulations and payment policies and operators' difficulty in obtaining and maintaining adequate liability and other insurance; changes in financing terms; competition within the health care and senior housing industries; negative developments in the operating results or financial condition of operators, including, but not limited to, their ability to pay rent and repay loans; the company's ability to transition or sell facilities with a profitable result; the failure of closings to occur as and when anticipated; acts of God affecting our properties; the company's ability to reinvest sale proceeds at similar rates to assets sold; operator bankruptcies or insolvencies; government regulations affecting Medicare and Medicaid reimbursement rates; liability claims and insurance costs for operators; unanticipated difficulties and/or expenditures relating to future acquisitions; environmental laws affecting the company's properties; delays in reinvestment of sale proceeds; changes in rules or practices governing the company's financial reporting; and structure related factors, including real estate investment trust qualification, anti-takeover provisions and key management personnel. Finally, the company assumes no obligation to update or revise any forward-looking statements or to update the reasons why actual results could differ from those projected in any forward-looking statements.
FINANCIAL SCHEDULES FOLLOW
HEALTH CARE REIT, INC.
Financial Supplement
CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands)
December 31
-----------------------
2005 2004
-----------------------
Assets
Real estate investments:
Real property owned
Land $ 261,236 $ 208,173
Buildings & improvements 2,659,746 2,176,327
Real property held for sale, net of
accumulated depreciation 11,912 0
Construction in progress 3,906 25,463
----------- -----------
2,936,800 2,409,963
Less accumulated depreciation (274,875) (219,536)
----------- -----------
Total real property owned 2,661,925 2,190,427
Loans receivable 194,054 256,806
Less allowance for losses on loans receivable (6,461) (5,261)
----------- -----------
187,593 251,545
----------- -----------
Net real estate investments 2,849,518 2,441,972
Other assets:
Equity investments 2,970 3,298
Deferred loan expenses 12,228 9,486
Cash and cash equivalents 36,237 19,763
Receivables and other assets 71,211 77,652
----------- -----------
122,646 110,199
----------- -----------
Total assets $2,972,164 $2,552,171
=========== ===========
Liabilities and stockholders' equity
Liabilities:
Borrowings under unsecured lines of credit
arrangements $ 195,000 $ 151,000
Senior unsecured notes 1,198,278 881,733
Secured debt 107,540 160,225
Accrued expenses and other liabilities 40,590 23,934
----------- -----------
Total liabilities 1,541,408 1,216,892
Stockholders' equity:
Preferred stock 276,875 283,751
Common stock 58,050 52,860
Capital in excess of par value 1,306,471 1,139,723
Treasury stock (2,054) (1,286)
Cumulative net income 830,103 745,817
Cumulative dividends (1,039,032) (884,890)
Accumulated other comprehensive income 0 1
Other equity 343 (697)
----------- -----------
Total stockholders' equity 1,430,756 1,335,279
----------- -----------
Total liabilities and stockholders' equity $2,972,164 $2,552,171
=========== ===========
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data)
Three Months Ended Year Ended
December 31 December 31
-------------------------------------
2005 2004 2005 2004
----------------- -------------------
Revenues:
Rental income $ 67,417 $ 59,739 $253,306 $213,755
Interest income 8,744 5,622 23,993 22,818
Transaction fees and other
income 1,806 558 4,548 2,432
Prepayment fees 0 50 0 50
-------- -------- -------- --------
Gross revenues 77,967 65,969 281,847 239,055
Expenses:
Interest expense 21,058 17,900 80,050 68,567
Provision for depreciation 21,107 18,620 80,000 66,897
General and administrative 4,254 6,247 17,249 16,585
Loan expense 502 825 2,710 3,393
Impairment of assets 0 0 0 314
Loss on extinguishment of debt 3,036 0 21,484 0
Provision for loan losses 300 300 1,200 1,200
-------- -------- -------- --------
Total expenses 50,257 43,892 202,693 156,956
-------- -------- -------- --------
Income from continuing operations 27,710 22,077 79,154 82,099
Discontinued operations:
Gain (loss) on sales of
properties 3,361 (1,272) 3,227 (143)
Income (loss) from discontinued
operations, net 850 404 1,905 3,415
-------- -------- -------- --------
4,211 (868) 5,132 3,272
-------- -------- -------- --------
Net income 31,921 21,209 84,286 85,371
Preferred dividends 5,334 5,442 21,594 12,737
-------- -------- -------- --------
Net income available to common
stockholders $ 26,587 $ 15,767 $ 62,692 $ 72,634
======== ======== ======== ========
Average number of common shares
outstanding:
Basic 55,992 52,326 54,110 51,544
Diluted 56,368 52,784 54,499 52,082
Net income available to common
stockholders per share:
Basic $ 0.47 $ 0.30 $ 1.16 $ 1.41
Diluted 0.47 0.30 1.15 1.39
Common dividends per share $ 0.62 $ 0.60 $ 2.46 $ 2.385
HEALTH CARE REIT, INC.
Financial Supplement - December 31, 2005
----------------------------------------------------------------------
Portfolio Composition ($000's) Exhibit 1
------------------------------
Balance Sheet Data # Properties # Beds/Units Balance % Balance
---------------------------------------------------
Real Property 425 42,998 $2,661,925 93%
Loans
Receivable(1) 17 2,208 194,054 7%
---------------------------------------------------
Total Investments 442 45,206 $2,855,979 100%
Investment Data # Properties # Beds/Units Investment(2) % Investment
----------------------------------------------------
Assisted Living
Facilities 195 11,746 $ 962,620 34%
Skilled Nursing
Facilities 203 27,748 1,266,196 44%
Independent/CCRCs 31 4,400 425,845 15%
Specialty Care
Facilities 13 1,312 203,768 7%
---------------------------------------------------
Real Estate
Investments 442 45,206 $2,858,429 100%
Notes: (1) Includes $16,770,000 of loans on non-accrual.
(2) Real Estate Investments include gross real estate
investments and credit enhancements which amounted to
$2,855,979,000 and $2,450,000, respectively.
----------------------------------------------------------------------
Revenue Composition ($000's) Exhibit 2
----------------------------
Three Months Ended Year Ended
December 31, 2005 December 31, 2005
------------------ -------------------
Revenue by Investment Type (1)
Real Property $ 69,756 88% $265,941 91%
Loans Receivable 9,620 12% 25,213 9%
------------------ -------------------
Total $ 79,376 100% $291,154 100%
Revenue by Facility Type (1)
Assisted Living Facilities $ 36,395 46% $132,935 46%
Skilled Nursing Facilities 32,876 41% 121,986 42%
Independent/CCRCs 5,012 6% 17,725 6%
Specialty Care Facilities 5,093 7% 18,508 6%
------------------ -------------------
Total $ 79,376 100% $291,154 100%
Notes: (1) Revenues include gross revenues and revenues from
discontinued operations.
----------------------------------------------------------------------
Operator Concentration ($000's) Exhibit 3
-------------------------------
Concentration by Investment # Properties Investment % Investment
-------------------------------------
Emeritus Corporation 50 $ 362,832 13%
Merrill Gardens L.L.C. 13 204,907 7%
Southern Assisted Living, Inc. 43 195,794 7%
Life Care Centers of America,
Inc. 23 195,129 7%
Commonwealth Communities
Management LLC 13 191,335 7%
Remaining operators (49) 300 1,708,432 59%
-------------------------------------
Total 442 $2,858,429 100%
----------------------------------------------------------------------
Geographic Concentration ($000's) Exhibit 4
---------------------------------
Concentration by Region # Properties Investment % Investment
-------------------------------------------
South 272 $1,495,446 52%
Northeast 63 521,929 18%
West 62 482,426 17%
Midwest 45 358,628 13%
-------------------------------------------
Total 442 $2,858,429 100%
Concentration by State # Properties Investment % Investment
-------------------------------------------
Florida 62 $ 409,750 14%
Massachusetts 37 360,191 13%
Texas 49 218,450 8%
North Carolina 44 215,514 8%
California 17 202,416 7%
Remaining States (31) 233 1,452,108 50%
-------------------------------------------
Total 442 $2,858,429 100%
----------------------------------------------------------------------
Committed Investment Balances Exhibit 5
-----------------------------
($000's except Investment per Bed/Unit)
Committed Investment
# Properties # Beds/Units Balance (1) per Bed/Unit
--------------------------------------------------
Assisted Living
Facilities 195 11,746 $ 975,696 $ 83,066
Skilled Nursing
Facilities 203 27,748 1,271,647 45,828
Independent/CCRCs 31 4,400 443,837 100,872
Specialty Care
Facilities 13 1,312 203,768 155,311
--------------------------------------------------
Total 442 45,206 $2,894,948 -na-
Notes: (1) Committed Balance includes gross real estate investments,
credit enhancements and unfunded construction commitments
for which initial funding had commenced.
----------------------------------------------------------------------
Selected Facility Data Exhibit 6
----------------------
Coverage Data
% Payor Mix -------------------
------------------------- Before After
Census Private Medicare Medicaid Mgt. Fees Mgt. Fees
----------------------------------------------------
Assisted Living
Facilities 88% 84% 0% 16% 1.52x 1.30x
Skilled Nursing
Facilities 86% 17% 15% 68% 2.18x 1.61x
Independent/CCRCs 92% 97% 1% 2% 1.43x 1.21x
Specialty Care
Facilities 68% 20% 59% 21% 3.36x 2.77x
-------------------
Weighted Averages 1.92x 1.53x
Notes: Data as of September 30, 2005.
----------------------------------------------------------------------
Exhibit 7
Current Capitalization
($000's except share price) Leverage & Performance Ratios
---------------------------------------- -----------------------------
%
Balance Balance
------------------
Borrowings Under Bank Debt/Total
Lines $ 195,000 6% Book Cap 51%
Long-Term Debt Debt/Undepreciated
Obligations 1,305,818 45% Book Cap 47%
Stockholders' Equity 1,430,756 49% Debt/Total Market Cap 40%
------------------
Total Book
Capitalization $2,931,574 100%
Interest
Common Shares Coverage 3.54x 4th Qtr.
Outstanding (000's) 58,125 3.10x YTD
Period-End Share Price $ 33.90 Interest
---------- Coverage 3.64x 4th Qtr.
Common Stock Market - adjusted 3.35x YTD
Value $1,970,438 53% Fixed Charge
Preferred Stock 276,875 7% Coverage 2.83x 4th Qtr.
Borrowings Under Bank 2.47x YTD
Lines 195,000 5%
Long-Term Debt Fixed Charge
Obligations 1,305,818 35% Coverage 2.91x 4th Qtr.
------------------ - adjusted 2.66x YTD
Total Market
Capitalization $3,748,131 100%
----------------------------------------------------------------------
Revenue Maturities ($000's) Exhibit 8
---------------------------
Operating Lease Expirations & Loan Maturities
Current Lease Current Interest Lease and
Year Revenue (1) Revenue (1) Interest Revenue % of Total
----------------------------------------------------------------------
2006 $ 22,209 $ 4,223 $ 26,432 8%
2007 0 358 358 0%
2008 0 2,878 2,878 1%
2009 906 2,003 2,909 1%
2010 1,726 1,922 3,648 1%
Thereafter 270,515 5,420 275,935 89%
-----------------------------------------------------------
Total $ 295,356 $ 16,804 $ 312,160 100%
Notes: (1) Revenue impact by year, annualized.
----------------------------------------------------------------------
Debt Maturities and Principal Payments ($000's) Exhibit 9
-----------------------------------------------
Year Lines of Credit (1) Senior Notes (2) Secured Debt Total
----------------------------------------------------------------------
2006 $ 40,000 $ 0 $ 2,596 $ 42,596
2007 0 52,500 14,544 67,044
2008 500,000 42,330 9,725 552,055
2009 0 0 33,207 33,207
2010 0 0 8,094 8,094
2011 0 0 19,791 19,791
2012 0 250,000 14,126 264,126
Thereafter 0 850,000 5,457 855,457
------------------------------------------------------------
Total $ 540,000 $1,194,830 $ 107,540 $1,842,370
Notes: (1) Reflected at 100% capacity.
(2) Amounts above represent principal amounts due and do not
reflect unamortized premiums/discounts or the fair value of
interest-rate swap agreements as reflected on the balance
sheet.
----------------------------------------------------------------------
Investment Activity ($000's) Exhibit 10
----------------------------
Three Months Ended Year Ended
December 31, 2005 December 31, 2005
-------------------- -------------------
Funding by Investment Type
Real Property $374,153 100% $622,547 97%
Loans Receivable 481 0% 19,936 3%
-------------------- -------------------
Total $374,634 100% $642,483 100%
Funding by Facility Type
Assisted Living Facilities $ 3,073 1% $ 52,971 8%
Skilled Nursing Facilities 138,883 37% 281,278 44%
Independent/CCRCs 232,055 62% 246,356 38%
Specialty Care Facilities 623 0% 61,878 10%
-------------------- -------------------
Total $374,634 100% $642,483 100%
----------------------------------------------------------------------
Disposition Activity ($000's) Exhibit 11
-----------------------------
Three Months Ended Year Ended
December 31, 2005 December 31, 2005
------------------ -------------------
Dispositions by Investment Type
Real Property $ 78,064 75% $ 88,098 60%
Loans Receivable 26,412 25% 58,923 40%
--------- ----- --------- -------
Total $104,476 100% $147,021 100%
Dispositions by Facility Type
Assisted Living Facilities $104,476 100% $146,042 99%
Skilled Nursing Facilities 0% 0%
Independent/CCRCs 0% 0%
Specialty Care Facilities 0% 979 1%
--------- ----- --------- -------
Total $104,476 100% $147,021 100%
----------------------------------------------------------------------
Discontinued Operations ($000's) Exhibit 12
--------------------------------
Three Months Ended Year Ended
December 31 December 31
------------------- -----------------
2005 2004 2005 2004
--------- --------- -------- --------
Revenues
Rental income $ 1,409 $ 2,936 $ 9,307 $14,522
Expenses
Interest expense 311 842 2,574 3,989
Provision for depreciation 248 1,690 4,828 7,118
--------- --------- -------- --------
Income (loss) from discontinued
operations, net $ 850 $ 404 $ 1,905 $ 3,415
----------------------------------------------------------------------
Funds Available For Distribution Reconciliation Exhibit 13
-----------------------------------------------
(Amounts in 000's except per share data)
Three Months Ended Year Ended
December 31 December 31
------------------ -------------------
2005 2004 2005 2004
--------- -------- --------- ---------
Net income available to common
stockholders $ 26,587 $ 15,767 $ 62,692 $ 72,634
Provision for depreciation (1) 21,355 20,310 84,828 74,015
Loss (gain) on sales of
properties (3,361) 1,272 (3,227) 143
Prepayment fees 0 (50) 0 (50)
Rental income less than (in
excess of) cash received 4,876 (1,657) 727 (13,792)
-------- -------- -------- --------
Funds available for
distribution 49,457 35,642 145,020 132,950
Impairment of assets 0 0 0 314
Loss on extinguishment of debt,
net (2) 2,214 0 20,662 0
-------- -------- -------- --------
Funds available for
distribution - adjusted $ 51,671 $ 35,642 $165,682 $133,264
Average common shares
outstanding:
Basic 55,992 52,326 54,110 51,544
Diluted 56,368 52,784 54,499 52,082
Per share data:
Net income available to common
stockholders
Basic $ 0.47 $ 0.30 $ 1.16 $ 1.41
Diluted 0.47 0.30 1.15 1.39
Funds available for
distribution
Basic $ 0.88 $ 0.68 $ 2.68 $ 2.58
Diluted 0.88 0.68 2.66 2.55
Funds available for
distribution - adjusted
Basic $ 0.92 $ 0.68 $ 3.06 $ 2.59
Diluted 0.92 0.68 3.04 2.56
FAD Payout Ratio
Dividends per share $ 0.62 $ 0.60 $ 2.46 $ 2.385
FAD per diluted share $ 0.88 $ 0.68 $ 2.66 $ 2.55
-------- -------- -------- --------
FAD payout ratio 70% 88% 92% 94%
FAD Payout Ratio - Adjusted
Dividends per share $ 0.62 $ 0.60 $ 2.46 $ 2.385
FAD per diluted share -
adjusted $ 0.92 $ 0.68 $ 3.04 $ 2.56
-------- -------- -------- --------
FAD payout ratio - adjusted 67% 88% 81% 93%
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
(2) Loss on extinguishment of debt is net of recoveries
received of $822,000.
----------------------------------------------------------------------
Funds From Operations Reconciliation Exhibit 14
------------------------------------
(Amounts in 000's except per share data)
Three Months Ended Year Ended
December 31 December 31
------------------ -------------------
2005 2004 2005 2004
--------- -------- --------- ---------
Net income available to common
stockholders $ 26,587 $ 15,767 $ 62,692 $ 72,634
Provision for depreciation (1) 21,355 20,310 84,828 74,015
Loss (gain) on sales of
properties (3,361) 1,272 (3,227) 143
Prepayment fees 0 (50) 0 (50)
--------- -------- --------- ---------
Funds from operations 44,581 37,299 144,293 146,742
Impairment of assets 0 0 0 314
Loss on extinguishment of debt,
net (2) 2,214 0 20,662 0
--------- -------- --------- ---------
Funds from operations -
adjusted $ 46,795 $ 37,299 $164,955 $147,056
Average common shares
outstanding:
Basic 55,992 52,326 54,110 51,544
Diluted 56,368 52,784 54,499 52,082
Per share data:
Net income available to common
stockholders
Basic $ 0.47 $ 0.30 $ 1.16 $ 1.41
Diluted 0.47 0.30 1.15 1.39
Funds from operations
Basic $ 0.80 $ 0.71 $ 2.67 $ 2.85
Diluted 0.79 0.71 2.65 2.82
Funds from operations -
adjusted
Basic $ 0.84 $ 0.71 $ 3.05 $ 2.85
Diluted 0.83 0.71 3.03 2.82
FFO Payout Ratio
Dividends per share $ 0.62 $ 0.60 $ 2.46 $ 2.385
FFO per diluted share $ 0.79 $ 0.71 $ 2.65 $ $2.82
--------- -------- --------- ---------
FFO payout ratio 78% 85% 93% 85%
FFO Payout Ratio - Adjusted
Dividends per share $ 0.62 $ 0.60 $ 2.46 $ 2.385
FFO per diluted share -
adjusted $ 0.83 $ 0.71 $ 3.03 $ 2.82
--------- -------- --------- ---------
FFO payout ratio - adjusted 75% 85% 81% 85%
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
(2) Loss on extinguishment of debt is net of recoveries
received of $822,000.
----------------------------------------------------------------------
Outlook Reconciliation Exhibit 15
----------------------
(Amounts in 000's except per share data)
Year Ended
December 31, 2006
-------------------
Low High
--------- ---------
Net income available to common stockholders $ 78,200 $ 83,100
Provision for depreciation (1) 97,500 97,500
--------- ---------
Funds from operations 175,700 180,600
Rental income less than (in excess of) cash
received (7,000) (7,000)
--------- ---------
Funds available for distribution $168,700 $173,600
Average common shares outstanding (diluted) 61,000 61,000
Per share data (diluted):
Net income available to common stockholders $ 1.28 $ 1.36
Funds from operations 2.88 2.96
Funds available for distribution 2.77 2.85
Notes: (1) Provision for depreciation includes provision for
depreciation from discontinued operations.
----------------------------------------------------------------------
EBITDA Reconciliation ($000's) Exhibit 16
------------------------------
Three Months Ended Year Ended
December 31 December 31
------------------ -------------------
2005 2004 2005 2004
--------- -------- --------- ---------
Net income $ 31,921 $ 21,209 $ 84,286 $ 85,371
Provision for depreciation (1) 21,355 20,310 84,828 74,015
Interest expense (1) 21,369 18,742 82,624 72,556
Capitalized interest 39 285 665 875
Amortization (2) 708 1,016 4,975 4,247
Provision for loan losses 300 300 1,200 1,200
--------- -------- --------- ---------
EBITDA 75,692 61,862 258,578 $238,264
Loss on extinguishment of debt,
net (3) 2,214 0 20,662 0
--------- -------- --------- ---------
EBITDA - adjusted $ 77,906 $ 61,862 $279,240 $238,264
Interest Coverage Ratio
Interest expense (1) $ 21,369 $ 18,742 $ 82,624 $ 72,556
Capitalized interest 39 285 665 875
--------- -------- --------- ---------
Total interest 21,408 19,027 83,289 73,431
EBITDA $ 75,692 $ 61,862 $258,578 $238,264
--------- -------- --------- ---------
Interest coverage ratio 3.54x 3.25x 3.10x 3.24x
EBITDA - adjusted $ 77,906 $ 61,862 $279,240 $238,264
--------- -------- --------- ---------
Interest coverage ratio -
adjusted 3.64x 3.25x 3.35x 3.24x
Fixed Charge Coverage Ratio
Total interest (1) $ 21,408 $ 19,027 $ 83,289 $ 73,431
Preferred dividends 5,334 5,442 21,594 12,737
--------- -------- --------- ---------
Total fixed charges 26,742 24,469 104,883 86,168
EBITDA $ 75,692 $ 61,862 $258,578 $238,264
--------- -------- --------- ---------
Fixed charge coverage ratio 2.83x 2.53x 2.47x 2.77x
EBITDA - adjusted $ 77,906 $ 61,862 $279,240 $238,264
--------- -------- --------- ---------
Fixed charge coverage ratio
- adjusted 2.91x 2.53x 2.66x 2.77x
Notes: (1) Provision for depreciation and interest expense include
provision for depreciation and interest expense from
discontinued operations.
(2) Amortization includes amortization of deferred loan
expenses, restricted stock and stock options.
(3) Loss on extinguishment of debt is net of recoveries
received of $822,000.
----------------------------------------------------------------------
CONTACT: Health Care REIT, Inc.
Ray Braun, 419-247-2800
Mike Crabtree, 419-247-2800
Scott Estes, 419-247-2800
SOURCE: Health Care REIT, Inc.